Spring Starts Slowly

Tax day has come and gone and we are all still standing. The GDP is slinking along at plus or minus 1 percent in the first quarter the economy appears gloomy. Don’t be too depressed as things will get better as the year goes on.

Retail Sales 
U.S. households cut back on purchasing autos in March contributing to the weak GDP performance in the first quarter. The Commerce Department said retail sales declined 0.3 percent last month after being flat in February. When automobiles, gas, building materials and food services are excluded core retail sales inched up 0.1 percent.
ConsumerIt’s hard for me to understand with job growth, wages slowly growing, low prices at the pump and growing home values. The only answer I can deliver is the stock market drop earlier this year combined by the negative partisan rhetoric from all of the presidential candidates are driving consumers away from spending.
The U.S. counts on two-thirds of its GDP to come from consumers, this is disappointing news.
Business Inventories
While we are on the Commerce Department reports, let’s take a look at inventories, a key part of the GDP. The high levels of inventories held at the retail and wholesale levels are restraining the freight markets.
Inventories barely fell inching down 0.1 percent in February, the same reading as January. Excluding automobiles, retail inventories rose 0.3 percent in February.
Expect retailers to continue deep discounting over the second quarter to work through these inventories. After all, if you’re a retailer it’s better to have the cash instead of inventory that sits collecting dust.
Factory Output
Industrial production fell 0.6 percent in March from February according to the Federal Reserve Bank. Factory output fell largely driven by mining (-2.9 percent), utilities (-1.2 percent), and manufacturing (-0.3 percent).
Industrial capacity fell a half percent in March to 74.8 percent, the lowest since August 2010.
If you are looking for good news, the Fed is reporting that a turnaround is coming as manufacturing output increased in the first quarter over the last fourth quarter.
What’s happening in the trucking market?
The March seasonally adjusted truck tonnage report from ATA came in at a reading of 137.6 reflecting a 2.2 percent year over year rise in tonnage. It’s a 4.5 percent decrease from February volume for the largest fall off since September 2012.
ATA reports a mixed freight market with soft volume with oil fracking/production and manufacturing putting a drag on the market.
The Cass Information Systems’ freight index fell 1.5 percent in March year over year but showed a 1.4 percent gain sequentially from February. For the first quarter Cass says their index was off 3 percent below the same quarter in 2015.
Cass is cautiously optimistic saying a better housing market, manufacturing growth, and strong job gains point to better days ahead.
Load board operator DAT said the spot market freight volume jumped 38 percent from seasonal freight in March. Compared to February, van freight availability in March increased 25 percent.
When compared to March 2015, the overall spot freight availability fell 35 percent. A 51 percent decline in the fuel surcharge contributed to a decline in all-in rates for all equipment types. All-in rates for vans were down 21 percent, reefers dropped 17 percent, and flatbeds were off 16 percent. The surcharge is pegged to the retail cost of diesel fuel.
Motor carriers are feeling the crunch
Motor carriers failures jumped up in the first quarter taking an estimated 3,585 trucks off the road. This is about three times more than the same period in 2015 according to a report by Avondale Partners.
So far this year, trucking failures were the highest since the third quarter of 2014 as revenue is down, drivers are demanding more pay, and fuel prices have bottomed out leaving carriers with very little pricing power.
Improved safety
ATA announced that the Department of Transportation data showed that fatal truck accidents fell 5 percent in 2014. The number of crashes involving big rigs is roughly half of those involving passenger vehicles.
ATA stated the number of miles traveled by large trucks increased 1.5 percent in 2014. This dropped the truck-involved crashes to 1.40 per 100 million miles.
Space costs spike
Looking for a warehouse? Be prepared for sticker shock as the price of industrial real estate continues to rise as the market is booming. With 24 consecutive months of growth and the vacancy rate down to 6.1 percent in the first quarter. In the first quarter of 2015 the vacancy rate was 6.8 percent so you can see the trend. 
This strong market is causing developers to build as we see industrial parks around the country with cranes building speculative distribution centers. They are getting increasingly larger.
Call it the Amazon effect, or whatever you like, but companies want their inventories to be closer to their customers. The hours of service restrictions on truckers contributes to this trend as carriers cannot legally serve some cities within the same time as they used to.
E-commerce continues to grow and even brick and mortar retailers are pushing more of their business on-line and this requires more piles of inventory in more places in order to satisfy customers who want their stuff in one day.
The hottest areas include Ney York/New Jersey, Dallas/Ft. Worth, Chicago, the Inland Empire around Los Angeles in California, Atlanta, and Detroit.
Working on the railroad
In the week ending April 9th, the Association of American Railroads (AAR) reported that the total U.S. weekly rail traffic was 479,059 carloads and intermodal units, down 14.1 percent compared with the same week last year.
Carload traffic was down 20 percent and intermodal volume fell 7.8 percent when compared to the same period in 2015. For the first 14 weeks of 2016, U.S. railroads reported cumulative volume of 3,372,955 carloads, down 14.2 percent from the same point last year; and 3,589,027 intermodal units, up 0.8 percent from last year. Total combined U.S. traffic for the first 14 weeks of 2016 was 6,961,982 carloads and intermodal units, a decrease of 7.1 percent compared to last year.
Wagner celebrates its 70th birthday! 
It’s a big week at Wagner as our managers from around the country fly in for meetings and business updates. It is indeed a pleasure to see everyone and five minutes in the room explains why Wagner Logistics is enjoying success.
We had a nice celebration Wednesday evening and are looking forward to servicing customers for many years to come.
Should you have a distribution project or just need some additional capacity in your lanes, I hope you will give us a call. As we say every day, Bring It!
Have a great day,
John Wagner Jr.
About Wagner Logistics
Wagner Logistics has been honored 15 years in a row by Inbound Logistics as a Top 100 3PL provider, we offer dedicated warehousing, transportation management, packaging and assembly operations across the United States with over 3,000,000 sq. ft. Current offices include Jacksonville FL, Cleveland OH, Pine Bluff AR, Dallas, TX, Omaha, NE, Clinton, IA, Edgerton, KS, and Kansas City MO and KS. We provide genuine customer service to our customers and our superior onboarding process will make your customer’s transition seamless. We work tirelessly to find innovative solutions to reduce supply chain costs while increasing your speed-to-market with our award winning technology.
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